McDonald's says its price hikes are putting off some customers
- McDonald's said some customers are more "wary" of its price increases.
- Execs said that low-income diners are placing smaller orders and eating out less often.
- Diners have been complaining that fast food is no longer cheap.
McDonald's keeps putting up menu prices — and it's putting off some diners.
"We certainly know consumers are more wary or weary of pricing," CFO Ian Borden told investors at the company's earnings call on Monday. CEO Chris Kempczinski said that diners had been placing smaller orders, especially low-income customers.
McDonald's had said at its earnings call in October that its price increases largely hadn't put customers off.
Diners have taken to social media to complain about the price of fast food, which they say no longer delivers the same value it used to.
McDonald's put menu prices up by around 10% in the US in 2023, Borden said. It raised prices by a similar amount in 2022, too.
But as inflation cools, customers should expect less dramatic price hikes this year, Borden said, adding that franchisees set their own prices.
"Where you see the pressure with the US consumer is that low-income consumer," Kempczinski said. "Call it $45,000 and under. That consumer is pressured. From an industry standpoint, we actually saw that cohort decrease in the most recent quarter, particularly I think as eating at home has become more affordable."
The cost of food to eat at home rose about 1.3% through 2023, according to the Bureau of Labor Statistics' consumer price index. But during that time, the cost of eating out at limited-service restaurants, which includes fast-food chains like McDonald's, grew 5.9%.
Kempczinski said that he expects low-income diners to be more attracted to the lowest-priced items on the menu rather than promotions.
The "absolute price point being probably more important for that consumer … to get them into the restaurants," he said, adding its temporary deals will resonate less with this consumer in 2024.
Instead, the chain plans to concentrate on its D123 platform, which prices some items at $1, $2, and $3, he said.
Reiterating comments he made to investors in October, Kempczinski said that McDonald's wasn't seeing "any real change in behavior" among middle and high-income diners, among whom he said the chain was continuing to gain share.
"The battleground is certainly with that low-income consumer," Kempczinski said.
Have McDonald's rising prices put you off? Email this reporter at gdean@businessinsider.com.
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